DESPITE questions being asked about its portfolio of investments, including a controversial £30m for a stake in Redwood Bank, Warrington Borough Council says it remains “pleased” with their long term investments.
While the Council rightly remains focused on the Covid-19 response, it still has serious questions to answer about its investments, especially in Redwood Bank, says Grappenhall and Appleton Thorn Lib Dem Borough Councillor Ryan Bate.
Recent ‘freedom of information’ requests conducted by one of his residents, Richard Buttery, have brought to light the concerns of council auditors, Grant Thornton.
Cllr Ryan Bate
Cllr Bate says, “Covid-19 has sent a tidal wave through the economy and this will have impacted the Council’s finances. In light of the pandemic’s impact, the Council must address ongoing concerns around its investment strategy and in particular it’s holding in Redwood Bank.
“There are outstanding questions on the justification for the price which Warrington Council paid for its share in the bank. The publicly released information suggests that it paid in the region of twelve times more per share compared to its partners.
“I understand the need for commercial confidentiality, but the Council needs to be much more open and transparent, not least with its own auditors. The Council needs to tell the public and opposition parties exactly where our investments now stand so that we can try to work through this together. What is the current value of the investment in Redwood Bank? We also need clarification about when the Accounts for 2017/18 and 2018/19 are going to be signed off.”
The council agreed to invest £30 million in the new challenger bank in January 2017 – for a business which was set up with an initial £650,000 investment. The investments to date have been made in Redwood Financial Partners Ltd (“RFPL”) as opposed to Redwood Bank Ltd (“RBL”). RFPL is the 100% shareholder of RBL.
The council has a 33 per cent share and the bank has a regional head office in the town, based at The Base.
Its main aim is to provide loans to SME’s – small and medium enterprises – in Warrington, the North West and nationally.
A Warrington Borough Council spokesperson said: “Despite the uncertainties COVID-19 poses, we remain pleased with the performance of our long-term investments, including Redwood Bank.
“We are confident in our share in Redwood Bank. The cost of shares can fluctuate due to changes in market value. In short for example, a 1p share is not worth just 1p – and is dependent on a range of factors. By investing in shares in Redwood Bank, the council has already supported a number of SMEs and we are confident this is a sound investment – as shown throughout our rigorous due diligence processes.
“The valuation of a bank is complex matter and is normally guided by the current market view. The estimated market value of a bank is subject to detailed analysis, and is very much subjective.
“For example, market analysis would take into consideration that while normally loss making over the first few years, a new bank is generally considered to have additional value or worth, due to the fact that the company has been granted a banking licence by the regulators. This level of detailed analysis is applied to Redwood Bank, as with any other bank.”
The council had been confident of having their accounts signed off by the end of March, before the COVID-19 pandemic struck.
4 Comments
The council doesn’t have any shares in Redwood Bank.
the “brown” envelopes have turned up then.
1. WBC didn’t buy a share in Redwood Bank but in Redwood Financial Partners Ltd, which owns 90% of Redwood Bank.
2. The first 2 years of Redwood were loss-making. So far, our initial £20 million investment is worth around £5 million. WBC will know whether year 3 has been profitable or – again – loss-making, but they refuse to share this information with citizens. I asked Russ Bowden at one of his ‘meet the leader’ sessions and he flat refused to tell me anything
3. I am very uneasy about an investment where one party puts up 89% of the cash for 30% of the value, and the other parties put in 11% for 70% of the value. The day we signed up to this, we effectively handed over millions of pounds of Council money to a bunch of millionaires
4. If, as we are regularly told, our investments are worth more than we paid for them – why not sell, and take a profit?
This needs a police investigation, in my view. The auditors haven’t signed off the council’s accounts, there is certainly something very odd about the Redwood investment – only a thorough investigation can reassure the public at this point.
Shortly after investing £30 million in Redwood Financial Partners, having previously said the investment was in a “new challenger bank”, WBC said there was no one [elected or employed] in the council with sufficient financial experience/expertise to be a director of the bank. Now it emerges “the Council did its own background checks on them [Redwood] as investment partners?” And it was “a conscious decision for the council to pay more for the shares [since it] reflected the fact the original shareholders took the majority of the risk in setting up and originally funding the bank”